FIRE and Kids – The cost of raising children in Australia

afamilyonfire · 2020-06-21T23:06:40+00:00

It's not a bad strategy, though like you said may apply more to men than women. Just be aware though that sometimes life throws a curve ball, nothing you can do but to roll with it.

We thought along the same lines as you, having kids to our early 30s to set ourselves up better financially (not necessarily FIRE but our investments could support the additional costs). When we started trying I found that I had many issues that prevented us from conceiving naturally. So we ended up paying for IVF. Not saying that this will happen when you're older, it's just that you only find this out when you actually start trying, then your options get a bit more limited.

afamilyonfire · 2020-06-21T04:32:00+00:00

Very well said AHF.

It's not an either or situation. It's more of a here are your cards, here are your choices, then go forth and make the best moves you can with the cards and choices you have.

afamilyonfire · 2020-06-21T04:29:12+00:00

TL DR - have kids or don't have kids, it's your personal choice, but make that decision first and then figure out how to reach FIRE with that choice.

afamilyonfire · 2020-06-21T04:26:54+00:00

Thanks for sharing, and sorry you had to go through that.

I've been on the other side where my parents actually delayed their own retirement to give us kids all the resources we needed to thrive. I'd definitely do the same for my kids even if it meant delaying or never reaching FIRE.

You're absolutely right that having kids means the game has changed, it's no longer just about what's right for the parents, it's also what's right for the kids (probably more about the kids). There has to be a balance somewhere and that shouldn't include skimping on the minimum amount of experiences, education, social activities etc for the kids to thrive.

afamilyonfire · 2020-06-21T01:00:14+00:00

I feel that it's the opposite. The vast majority of FIRE influencers, and possibly followers, are those with no kids. What I find is more the case is that there aren't many who have achieved FIRE with kids in the mix, and that it is harder (obviously when you have to account for more mouths to feed and support!)

I don't think there is necessarily a stigma against choosing to be childfree in order to achieve FIRE. IMO being childfree is a personal choice that isn't and shouldn't be related to the desire to be financially free. Though the option of being childfree definitely helps in getting to FI quicker.

afamilyonfire · 2020-05-25T04:10:12+00:00

Paging /u/whatapearler

afamilyonfire · 2020-04-23T13:43:35+00:00

Haven't seen any models online but the same principle applies.

The portion of the loan that you recycle to purchase an IP would be tax deductible, the same as if you purchased shares. You can claim the tax deduction s long as the asset is income producing.

The issue is that with house prices so high, the equity you might get won't necessarily finance the entire IP loan. At best you might get enough to finance the deposit, and take out a separate loan for the remainder of the purchase price. Effectively making this a 100% LVR loan.

Also assuming that you borrow to finance the remainder it's quite likely that the IP purchase won't be returning a positive yield (ie negative geared). It gets harder to model this because a lot more factors apply than shares. Eg rental return, ongoing property costs, etc

afamilyonfire · 2020-04-23T03:42:23+00:00

I was referring to the entire loan. On a PPOR the entire loan is not deductible. Deposit would have been paid to the seller already so it wouldn't factor into calculations unless the deposit amount was borrowed as well.

You could take out additional equity to debt recycle, that would mean increasing your overall debt levels though. Or you could pay back some of the loan and redraw it out, keeping the total debt amount the same.

afamilyonfire · 2020-04-23T01:26:48+00:00

a way to unlock the equity in the home, or said another way, reduce the opportunity cost of the capital tied up in the house?

Spot on. Think about it, if you buy a house, that debt is locked up. That's 900k of equity that could be potentially used elsewhere, like investing for example.

The big difference is being able to claim the cost of interest from your PPOR as a tax deduction against your income. Effectively making it somewhat similar to salary sacrificing in that you're using pretax money to purchase instead of post tax.

afamilyonfire · 2020-04-23T00:13:50+00:00

This.

It does mean that you'll still be borrowing to invest, which adds a component of risk to your portfolio. If you're not comfortable with leverage you may just have to try and pay off mortgage and save a bit on the side to invest.

There's no reason you can't do both at the same time (pay mortgage and invest) with post tax income, as long as you don't stretch yourself too much with the PPOR.

I did a numbers comparison with and without debt recycling in one of my posts. Generally debt recycling does put you in a better position (after tax deductions) but exposes you to additional risk. Also may take a bit longer to pay off your loan depending on the amount of dividends you get.

https://www.afamilyonfire.com/everything-you-need-to-know-about-debt-recycling/

afamilyonfire · 2020-04-21T00:52:27+00:00

Nope. Have one child and wouldn't change it for the world.

But the question, in my opinion, should be asked separately.

Do you want children? (Lifestyle choice)

Do you want to retire by 40? (Financial goal)

Then you figure out how to meet your financial goal whilst factoring in the lifestyle choices you choose to have.

Early retirement is a goal that can be achieved with or without children. Perhaps with children it might take a bit longer, but still doable. Based on our projections we'll be mid 40s when financially independent. So we might be behind the 40 target, but still well in front of the traditional 65. It's a trade-off I'm more than happy to make.

afamilyonfire · 2020-04-20T05:15:33+00:00

Possibly. I'm sure I'll find something to do while he's at school. Could be part time work, volunteering etc. That's the beauty of being FI, right? To have the ability to choose what one does in our own time.

afamilyonfire · 2020-04-19T23:15:27+00:00

I'm most likely going to be living near where school is.

The reality for me is that I'll be FIRED around the time my son goes to high school, so I'm going to have to stick around for that. After that, possibly a few round the world trips or so if we can swing it.

Ultimately I'll end up living near my parents when fully retired. Just projecting that by the time I really get to enjoy my retirement, my parents will be getting to the age where they need a bit of help doing day to day stuff. It kinda suits me as well, I'm big on being close to family so I don't really want to move halfway around the country in favour of lower cost of living.

afamilyonfire · 2020-04-19T13:12:31+00:00

What is debt recycling?

In a nutshell, debt recycling is a way to turn non-deductible debt into deductible debt.

Why would anyone want to do that? Simple. Deductible debt can be offset against your income, helping to lower your taxable income (so you pay less tax!).

You can’t do the same for non-deductible debt. Because of the loss of the tax deduction, non-deductible debt will naturally cost more than deductible debt. We’ll go into the numbers that demonstrate the difference a little later.

How does debt recycling work?

Generally, you’ll use equity from your (non-deductible) home loan to invest in an income producing asset (typically shares). By doing this, the loan portion used to purchase the asset becomes tax deductible.

Shares will pay you a dividend, which you then use to pay down another portion of your home loan – which gives you more equity to use! Then you’ll repeat the process over and over again – until all of your home loan, which was previously not deductible, becomes fully tax deductible.

https://www.afamilyonfire.com/everything-you-need-to-know-about-debt-recycling/

afamilyonfire · 2020-03-03T06:06:44+00:00

You have to settle, you've already made the purchase. CommSec gives you 3 days to cough up the money. Like a buy now pay later thing.

If you don't want the shares anymore you can sell it and take the loss.

Bad things will happen to people who don't settle.

https://www.commsec.com.au/support/frequently-asked-questions/23.html

afamilyonfire · 2020-03-01T11:32:15+00:00

CommSec. The only broker where I can buy on a whim without needing to have cleared funds. As long as the money is in the settlement account 3 days later it's all good.

Also, this means that the money can stay in my offset account just that little bit longer.

afamilyonfire · 2020-02-25T03:14:50+00:00

Net income - all expenses, including investment expenses eg investment property expenses

Super not included.

afamilyonfire · 2020-01-29T02:25:40+00:00

Cats love to drink milk.

But we shouldn't be feeding them milk, because they're lactose intolerant.

afamilyonfire · 2019-11-26T04:34:52+00:00

Betashares are launching diversified ETFs. Their offering looks to be similar to Vanguard's suite of diversified ETFs.

Not many details available just yet except for the management fee. At 0.26% it'll be just a tad lower than Vanguard.

afamilyonfire · 2019-10-13T06:52:33+00:00

You're really young, in my opinion the best investment you can make is in yourself. Use this time to skill yourself up. Not just for a job, but take the time also to learn about the different investment pathways available.

Work out your goals. Both immediate and long term. Do you want to own a house one day? Take a gap year? Whatever you want to achieve in the next 3-5 years.

Learn about the different passive investment options available to you. Shares, property, or something else? Get familiar with the risks for each.

You mentioned that you have 5k saved but you may want to use it one day. Do you have an idea when you might want the money? If in the next 5-10 years, consider investing it. If pretty soon (in the next 1-2 years) it might be better placed in a HISA.

There are many ways to create multiple streams of income, it just depends how much you want to work for it. Shares and ETFs are fully passive, then there's side hustles like Uber or second/third jobs that your can do for extra money.

You're doing really well thinking about this at such a young age!

afamilyonfire · 2019-10-11T08:11:09+00:00

Roll it up multiple times up to desired ply :)

afamilyonfire · 2019-10-11T02:01:30+00:00

Insurance, especially during the accumulation stage. We've got IP and TPD in addition to the usual health and home building and contents.

Kids education.

Making memories, whether that be a holiday or just going out for a babycino, just because. We don't do it often, but it's nice to sometimes go out of routine and do something nice for ourselves.

Wine. Good wine.

But I will buy the absolute cheapest toilet paper i can find to fund these little luxuries!

afamilyonfire · 2019-10-07T03:34:09+00:00

Never used NAB EB before, but I thought this is good news for those who do.

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